JV Licenses & Out of State Partners, NV Applications, Bid Limits & Financial Statements

Attending conferences, CSLB Board meetings and other events important to contractors is part of my job. For many contractors seeking contracts and new bid opportunity also takes them out ‘on the road’…

 Q:  We are a CA “B” General Building contracting company and are applying for a new license in the State of Nevada.  We typically do smaller remodeling jobs; we don’t build new homes or buildings.  We submitted our application and requested a bid limit of $50,000.  The Nevada Board sent a letter stating that as “B” contractors we are required to request at least a $200,000 bid limit, and further stated that our financial statement must “support” that bid limit request.

We don’t need a bid limit that high, nor are we sure that our financials “support” a limit that high. My boss suggested I contact you to see if you know of any way around this requirement.  Just to throw in another wrench, we need this license in a hurry and we don’t have time to wait for our accountant to prepare a new financial statement!

 

A: There is no way around the bid limit requirement for “B” contractors, nor is there any way around the requirement that you must be able to show some equity to support your requested limit. The Nevada Board assumes that most “B” contractors are doing ground-up construction and therefore the majority of their jobs will go over $200,000.

Q:  I represent a construction company Incorporated in Delaware.  They are planning on conducting business in Los Angeles but do not have a CA contractor’s license.  My client would like to know if in place of taking the law and general building exams, he can associate or Joint Venture with an established company that possesses a General contractor’s license?

A:  Your client may only “Joint Venture” with an established company if they themselves have a CA contractor’s license.  By definition, a Joint Venture (JV) consists of two or more entities that are licensed, active and in good standing.  This would mean having someone qualify a license for the out-of-state company by taking the law and trade exams. If you go through this process, there would be no need for the JV.

Q:  I would like more information on getting my Nevada state contractor’s license for remodeling homes.  Other than passing the exams, what obstacles am I likely to encounter during this process.

A:  The Nevada license application runs 20+ pages.  Among the requirements are securing a statement from your bank; providing a detailed financial statement (or one compiled by your CPA); and getting 4 notarized references that attest to your 4 plus years experience in the building trades. Once the application is submitted and reviewed, the State Board will notify you regarding their testing requirements.  After you pass both the business management and trade exams, the Board will notify you regarding the contractors’ bond amount.  This bond is on a sliding scale and is tied to the bid limit you list on your application.

Service & Repair vs HIC limits, Bid Limits for Licensing Requirements & Pocket Cards

When there is a question of what the law actually says people will try to exploit it to their advantage. This is important to both sides of a contract- consumer and contractor. A recent case prompted the CSLB to issue a News Release highlighting the need for consumers to understand the difference between a service and repair contract and a home improvement contract.  This distinction is also crucial for licensed contractors…

CSLB says, “A ‘service and repair’ contract is used when immediate or emergency work is needed and the total cost will be under $750, such as for a broken air conditioner or plumbing issue; and the ‘home improvement contract,’ which is any job that is not an emergency and will cost $500 or more in combined labor and material costs.”

Concerned with confusion among both contractors and the communities in California, the Contractor’s State License Board noted, “It’s important that consumers understand which type of contract they’re entering before signing. A service and repair contract is for immediate work and has no cancellation clause, but a home improvement contract provides the consumer with a three-day right to cancel, which enables time to obtain estimates from other contractors.”

The Board’s release states that, as homeowners often learn, and as contractors know from experience, one ‘thing’ leads to another and another contract may become necessary to address new found issues. “If, during a repair visit, the technician identifies other non-immediate mechanical or safety concerns, CSLB recommends getting additional bids from other licensed contractors before hiring someone. If the work happens to be immediately necessary and is more than $750, keep in mind that the contract you sign should be a home improvement contract, which provides additional consumer protections, such as who will pull the necessary construction permits from the local building department.”

As our reader’s may recall and the Board’s release emphasized, “Also be aware that a home improvement contract can only be negotiated by the license’s personnel of record, or a registered home improvement salesperson (HIS). If the work is part of a home improvement contract, the contractor is not allowed to charge more than 10 percent of the total cost or $1,000, whichever is less, as a down payment.”

 

Charged by the State Legislature to protect consumers in the Golden State as part of the Department of Consumer Affairs, the media release by CSLB Registrar Cindi A. Christenson stressed that,  “In California, any contractor who offers a bid that is $500 or more in combined labor and material costs must be licensed with CSLB in their specific trade. If a contractor uses salespeople to represent the company, each must be registered with CSLB as an HIS. Both contractors and salespeople are issued pocket cards by CSLB with their license or registration information. Consumers can ask to see the pocket card and a photo identification to make sure the information is accurate.”

CSLB encourages consumers to always “Check the License First” by visiting www.cslb.ca.gov or calling CSLB’s toll-free automated line 800.321.CSLB (2752). Also, visit CSLB’s website for tips about how to hire a contractor and to sign up for CSLB email alerts.

 

Reviving Suspended Corporate Licensing, Fencing, Licensing for Consultants & Fees

‘Work-arounds’, loopholes, or gray areas can sometimes be exceptions to the rules. But they are often looked for to avoid doing what is ‘business as usual’ as in our first question. Nice try but let me count the ways it’s not going to work. We finish with raising a contractor’s ‘suspended’ corporation…

Q:  We are a service company with a “B” (General Building) license.  We contract with homeowners but we don’t actually perform the work; we sub-contract it out to licensed specialty contractors.  We are planning to form a separate company that would act in a similar capacity and we are wondering if this new company will need a license.  The new company will not actually sign contracts, but we would act as a construction manager, producing the plans, designing, and coordinating the project, and then set the homeowner up with our various subcontractors and they would contract with the homeowner directly.  Our new company would in turn receive a percentage.  Are we required to be licensed?

 

A:  There are a couple things improper with the scenario you described.  First of all, yes, you would be required to be licensed.  B&P Code Section 7026.1 defines “Contractors” to include consultants who provide or oversee a bid for a construction project, arrange and set up work schedules for contractors, and maintain oversight of the construction project.   Since the new company would be maintaining oversight of the projects, you will be required to obtain a license.  Of course, an exception would be if the home improvement project is under $500.

Secondly, in our opinion, receiving a percentage of the contract essentially sounds like a referral fee or an inducement, which is prohibited by Section 7157 of the B&P Code.

Q:  We have a situation where we were given a subcontractor from the owner of the project, who has apparently used this sub on several projects for installing interior fencing.  In the case of the project we are under contract for, this subcontractor is under contract with us.  The odd part is they don’t have a California contractor’s license.  They told me since they don’t get inspection on the fencing, they don’t have to have the contractor’s license, only a business license.  Do you know if that is correct?  I thought if you did actual work on a construction project in CA you needed a contractor’s license.

A:  Assuming the work is over $500, you are correct.  A “C-13” (Fencing) license is required to install fences.

Q:  I haven’t worked in California for the last few years but I have a customer requesting that I do some work for them in the LA area so I need to renew my license.  When I look it up online it says that in order to renew I will need (among other things) to get my corporation in good standing with the Secretary of State.  What do I need to do and can you help?

A: Yes, when I inquired with the Secretary of State, I found that your corporation is suspended because of a Franchise Tax Board (FTB) issue.  Typically this has to do with failure to file and/or pay taxes in a timely manner.

We can help!  We would first find out what returns/monies are needed and get the required information submitted to the FTB.  Once all returns are filed and payment has been made (if required), you will need to complete a Revivor form, also submitted to the FTB.  The FTB will then notify the Secretary of State, which should put your corporation back in good standing.

DIR Registration, Family Transfer and RME Reactivation of Expired Licensing

Important updates you don’t want to miss, but first losing a family member is never easy, but our second question shows that losing their loved one was only the beginning for this contractor family. Although it’s not much, we do find a small silver lining to the dark clouds…

Q:  We’re contemplating hiring this guy to make him one of our Responsible Managing Employees (RME). However, his license expired in 2007.   What would be involved in reactivating his license?  He claims that he should be able to apply for a Waiver of the exam since he has the required experience and does have verified references that can attest to his background.  What are you thoughts?

A:  Once a license has been expired for over five years you can no longer renew it. Period. When an individual has been unlicensed for over five years they are required to take the exams again and show the required four years of work experience.  Since your potential employee’s license expired in 2007 and he hasn’t been the Qualifier on any other license since then, he would need to re-certify his experience and re-test. Unfortunately.

Just FYI, even though his license cannot be renewed, since it’s a sole proprietor license, if he ever wants to re-apply in the future he can request the license number back.

Q:  We currently have a “C-27” (Landscaping) and a “C-61”/”D-44” (Sprinklers) license.  I am the Responsible Managing Officer (RMO) for the “C-27”.  My father Qualifies the “D-44” classification but he passed away early last year.  We never notified the CSLB.  We are up for renewal and it requires his signature.  What do we do?

A:  First of all sorry for your loss.  I would suggest signing the renewal and submitting it with a copy of your father’s death certificate.  Be aware that since you only get 90 days to replace a Qualifier, once the CSLB is notified that your father passed away last year the “D-44” will automatically be removed from your license.  The “D-44” classification no longer exists and is now covered under the “D-12” (Synthetic Products) classification, which you may decide you want to add to your license.  However since the “C-27” classification allows you to sprinkler systems, it’s not really necessary that you have the additional specialty classification.

First, for those contractors who work on public works contracts, here is a reminder to register with the State Department of Industrial Relations (DIR).  Beginning on March 1, 2015, all contractors were required to register with DIR and effective April 1st, this registration will be necessary in order to be awarded a public works contract – even if there was no bidding process.

According to the CSLB, the DIR registration requirement is a result of Senate Bill (SB) 854, a budget trailer bill that became effective on June 20, 2014.  This legislation also changed laws pertaining to the administration and enforcement of prevailing wage requirements.

Contractors also will be required to submit certified payroll records (CPRs) to the Labor Commissioner’s office for all new projects awarded on or after April 1, 2015.

Before bidding on a public works project, a contractor can check with the DIR, which maintains a listing of registered contractors and subcontractors on its website.  This site is also used to assist awarding bodies that must confirm this registration before considering a bid or awarding a contract.

Second, and crossing State lines, the Nevada State Contractor’s Board (NSCB) recently released a reminder for all contractors to include their license number on all advertisements.  The NSCB often monitors various print and online advertisements such as Angie’s List, Craigslist, and local publications and has begun to see an increase in licensed contractors failing to include their license number in advertisements.  As NRS 624.720(3) states, “All advertising by a licensed contractor must include the name of the contractor’s company and the number of the contractor’s license.” Period.

 

“C-61″/”D-21” Pumps & Cranes, Listing Corporate Officers & AZ Handyman Experience for Licensing

What can you do in Arizona that you can’t do here?  We also help contractors with questions on LLC and foreign corporations, and we ‘raise’ the spirits of a Nevada company looking for work in California…

Q:  I have worked as a journeyman handyman/contractor for almost a year in California and I just recently moved to Arizona.  I have done renovations and repairs on my own house over the years and then started my own handyman business almost a year ago.  I want to obtain a contractor’s license in Arizona so that I can do bigger projects but I don’t have the four years of full-time work experience.  What can a person do if they need a license to do work but they don’t have the experience?  Is there a type of license I can get to gain the experience in order to eventually obtain the broader General Building (“B”) license?

 

A:  Yes there is!  While you’re correct that the “B” license requires four years of experience, Arizona has many specialty classifications that do not require that you document four years of experience.  For example, the flooring (“CR-8”) license requires three years of experience, and the Painting (“CR-34”) license only requires two years of experience.  In your case, you may be interested in the Minor Home Improvements (“R-62”) license that doesn’t require any experience at all!  The “R-62” allows you to do remodeling, repairs and improvements not exceeding $5000.  No structural work can be performed.  Electrical, Plumbing, AC, Heating, Boilers, and Roofing must be performed by appropriately licensed contractors. Let us know if we can help as we work in Arizona, Nevada and California regularly.

 

Q:  You helped me in the past with my previous company I did consulting work for. I’ve joined another company on a full time basis now.  We’re contemplating setting up a subsidiary for which we will need to obtain new contractor licenses.  I know that there’s some additional cost/complexity for using Limited Liability Company (LLC), but I was wondering if there was any benefit/detriment related to using a California corporation as opposed to a Delaware corporation.

 

A:  That would be something that you would want to consult an attorney or your accountant about.  With regards to the CSLB and the licensing process, the difference between applying as a California corporation vs. a Delaware corporation would be the personnel listed on the application.  Foreign corporations are required to list only their President and Qualifying Individual on the application, while California corporations must list their President, Secretary, Treasurer, and Qualifying Individual on the application.

 

Q: I am a crane and rigging contractor in Nevada.  Here it’s a “C-14i” classification and there was only a Business exam that was required.  One of my customers is requesting my services in California so I need to get licensed.  I checked a couple of competitor’s licenses in CA and they both have an “A” (General Engineering) license.  Is that required to perform crane and rigging services in California?  I’m worried that I would not be able to pass the trade exam since I have no knowledge of Engineering outside of the crane business I’ve run for the last 10 years.

A:  While a General Engineering contractor can operate cranes and material hoisting equipment, the “A” license is not required in your case.

The “C-61”/”D-21” (Machinery and Pumps) classification allows you to install, remove, modify or repair pumps; conveyer; cranes; dock levelers; various hoisting and material handling equipment.

General Partners, DOSH & “C-22”, Limits & Scope of “C-27” Licenses

What work, outside your specialty, can you do? Our first contractor finds himself‘fenced out’ on a job he can rightly do. A demolition contractor helps us‘break down’ the new ‘asbestos licensing’, and we must ‘demolish’ the ideas of a partnership hoping to maintain the ‘status quo’ in their current license…

Q:   We currently have a “C-27” (Landscaping) license.  We gave a bid to an insurance company for fencing but they said that we could not do the job since we are not a ‘C-13’ (fencing) contractor.  Aren’t we permitted to perform fence installation if it’s part of a landscape?

 

A:  The key to your question is “if it’s part of a landscape”.  Board Rule 832.27 states that a landscaping contractor may undertake any single trade contract as long as the work is a part of “…landscape systems and facilities…which are designed to aesthetically, architecturally, horticulturally, or functionally improve the grounds within or surrounding a structure or a tract or plot of land…”

 

You may want to refer the Insurance Company to the CSLB web site, which has a “Building Official Information Guide”.    One FAQ is “Can a landscaping contractor build a perimeter wall?  The answer is they may, “only if the perimeter wall is part of a total landscaping project.”

Further, in the Board’s publication, “Hiring the Right Landscaper”, one of the listed “Common Landscape Projects requiring a contractor’s license” is fencing.  Of course, a “C-13” contractor can perform this work; however, as in your case, this is one instance when more than one classification can be suitable for a particular project.

 

Q:  We are a demolition contractor and we frequently do asbestos abatement.  We have the asbestos certification on our license and we are also registered with DOSH.  I see that the CSLB now has a “C-22” Asbestos Abatement classification.  Are we required to add that to our license in order to continue providing the asbestos abatement services?  Will I need to take an exam?

 

A:  The “C-22” classification is not a replacement for the asbestos certification, which still continues to exist.  The asbestos certification that you currently have allows you to perform asbestos abatement work in the trade(s) in which you are licensed and as allowed by your DOSH registration.  The “C-22” is required if you plan to expand the scope of your asbestos abatement beyond work associated with your demolition classification.

As with all other classifications, the “C-22” requires that you document at least four years of full time journeymen (or above) experience, within the last ten, performing asbestos abatement work.  A trade exam is also required.  You may be granted a Waiver of the exam if you have held the asbestos certification, active and in good standing, for at least four years within the last ten.  In order to qualify for the waiver you must have also been registered with DOSH for that period of time.

 

Q:  I currently have a construction company with two other Partners, one of them being my husband.  The third Partner is retiring.  My husband and I would like to keep the business and the license in place but just re-structure the Partnership and change the business name.  How do I go about notifying the CSLB of the change?

 

A:  Unfortunately when a General Partner leaves the Partnership, the license must be canceled.  You will be required to apply for a new license for the new structure of your entity.  If you use the same Qualifier, he/she would not be required to re-take the exams.  Please contact us if you’d like assistance with the process.

“C-55”, LLC Members & Managers, and Qualifying More Than One License

While most contractors have a grasp of the laws they work under, some of those rules really require an expert eye. Long-awaited in California, the availability of LLC licensing is not without some remaining rumors and confusion among contractors.  Finally, we have to disappoint a NV contractor who thought he might avoid one CA exam…

Q:  I read in one of your recent articles that in order to Qualify more than one license the individual must own at least 20% of each entity.  Is there a specific B&P code section that states that requirement?

A:  Yes, B&P Code section 7068.1 conveys the few circumstances that allow for an individual to Qualify more than one license.  These include: 1) There is common ownership of at least 20% of the equity of each individual or firm for which the person acts in a Qualifying capacity; 2) The additional firm is a subsidiary of or a Joint Venture with the first.  “Subsidiary” is defined as one firm owning at least 20% of the other firm; or 3) The majority of the Partners, Officers, or Managers are the same.

 

Q:  We are in the process of getting a contractor’s license for our Limited Liability Company (LLC).  Our application was rejected and according to the CSLB’s website the reason for the rejection is that the members/managers don’t match.  Do you know what that means?

 

A:  As you likely already know, LLC’s are required to register with the Secretary of State and file a Statement of Information listing the Members/Managers/Officers of the company.  The personnel that you have listed with the Secretary of State must match exactly with the personnel you have listed on the application and contractor’s license.  The CSLB’s rejection is most likely because what you have listed on the license application doesn’t match exactly what you have listed in the Secretary of State’s records.

 

 

Q:  We have a “C-30”  (Installing Equipment to Treat Water) license in Nevada and we need to get licensed in California.  I looked through the list of classifications and it appears that I will need to get a “C-55” (Water Conditioning) license in CA.  Is there a trade exam for that?  I didn’t have to take one in Nevada.  If there is a trade exam, will I qualify for reciprocity?

A:  Yes, there is a trade exam for the “C-55” classification.  With the exception of the “C-61” classifications, all other “C” classifications require a trade exam.  Unfortunately the water conditioning classification is not reciprocal so you will be required to take two, both the law and trade exams.  Please contact us if you’d like our assistance with the process.

Multiple Sole Owner Licensing, LLC, Renewals & Suspended Licenses

While you can’t ‘clone’ yourself yet, it is possible for a Sole Owner to ‘multiply’ his contractor licensing opportunity. A short answer for a long question and good news from Arizona resolving an issue and updating our Q&A from a recent column…

Q:  I have a General Building license and I want to also get a “C-36” Plumbing license.  The CSLB told me to complete an Additional Classification application so I did that and submitted it, however now I’m thinking that I’d like a separate license number for the plumbing business.  Can I have more than one Sole Owner license?

A:  Yes, an individual can have more than one Sole Owner license.  In fact, there is no limit to how many Sole Owner licenses a person can have.  However, in your case you will need to withdraw your Application for Additional classification in order for the CSLB to process the application for a new license.

 

Q:  We recently merged our corporation in to a Limited Liability Company (LLC), both of which hold active contractor licenses.  The Secretary of State shows the corporation as “merged out”, but the CSLB still shows that our contractor’s license is active and doesn’t expire until August.  The LLC currently only holds the “C-10” (Electrical) classification while the corporation has the B (General Building) along with many other classifications.  Can we still use the corporation license to sign contracts for work that doesn’t fall under the “C-10” (in which case we’d use the LLC license) since the license is still active?  We plan to move all the classifications from the corporation’s to the LLC’s license but obviously that will take some time.

 

A:  Even though your license is still active, technically the corporation no longer exists so you should not be doing business under that entity.

 

Q:  My license is currently Suspended due to a judgment (which I am working on resolving) but I received a renewal notice.  Do I still send in the renewal even though it’s Suspended?

A:  The CSLB will not renew your license as Active until you clear the Suspension.  You can still send in the renewal on time with the appropriate fee to avoid the delinquent fee, but if you don’t have documentation along with it showing the judgment has been resolved the CSLB will send you a rejection/correction letter asking for whatever is required to clear the Suspension.

 

In a recent column we addressed a reader’s question regarding a notice he received from the Arizona Department of Revenue stating that contractors were no longer required to have a TPT (Transaction Privilege Tax) license.  At the time, the Arizona Registrar of Contractors (ROC) was in fact still requiring that contractors maintain their TPT license, however they were working with the Legislature to eliminate this requirement.

 

The ROC was successful in making the law consistent with the Department of Revenue and they no longer require that a TPT license be obtained for a contractor’s license, nor are contractors required to maintain existing TPT licenses.

 

Family License, SSI Numbers and HVAC Ambassadors

A family with a ‘number’ of questions helps contractors understand how to keep their business alive after an unexpected loss. We always learn something when assisting attorneys with contractor licensing law, and we get an update on the ‘ambassadors of the air’…

 

Q:  My husband recently passed away.  His Sole Owner contractor’s license is still active and our son has worked for him since he was a teenager.  I am taking over ownership of the business but I don’t have any construction experience.  I plan to use my son as the Responsible Managing Employee (RME) but I am wondering if we can take over my husband’s license number?  Would we submit an application to replace the Qualifier on his license?

 

A:  First of all sorry for your loss.  Actually you will be required to apply for a new license, however you can request to have your husband’s license re-issued to you. B&P Code Section 7075.1c says that a license number can be re-issued to an individual “when the individual is an immediate family member of a licensed individual who is deceased or absent and the license is required to continue an existing family contracting business.”

 

Q:  I am an attorney and I have a new client who is a General Contracting corporation in Germany.  They need to obtain a license in California and they have designated a qualifier out of New York who has his own sole owner license in CA (which he is willing to inactivate).  I understand that foreign corporations are required to list their President on the application.  The President is not a US citizen.  On the license application, can he indicate in the Social Security number field “not a US citizen”, and if he cannot, can we designate the Qualifying individual as the President for the license purposes?

 

A:  The CSLB requires that every individual listed on the license application have a Social Security number and it needs to be included on the application.  There is no way around that requirement.

I am not an attorney nor offer any legal advice, however in regards to your second question, keep in mind that your client is signing under penalty of perjury that the information on the application is true and correct! If the Qualifier is not the President of the corporation, technically you have a falsified application.

 

Your client will be required to file a Statement of Information with the Secretary of State that will reflect the Officers of the corporation.  The President that you have on file with the Secretary of State should match what you have listed with the CSLB.

Attention HVAC Contractors:

The CSLB has recently created an Ambassador Program for “C-20” (HVAC) contractors.  The program was formed, in a partnership with the California Energy Commission, to help promote proper HVAC installation by licensed contractors.  The agencies developed a series of educational fact sheets for HVAC contractors to utilize in their customer bid packets.

The packet they constructed includes five items that they encourage HVAC contractors to utilize.  According to the CSLB’s website, “In addition to a cover letter you can customize before offering it to prospective customers, are four informational guides about the financial and energy-saving benefits of proper installation and inspection.  You can print and use these pages as part of your marketing effort, and potentially set yourself apart from your competition.”